Friday, March 1, 2013

What are the Operating Losses on Roads?

Whenever I read about the money Amtrak is losing, my first thought is what are the operating losses on roads? Why is it that we don't expect most infrastructure in this country to be able to recoup costs but we expect different from trains? What is it about trains that makes some Americans so angry (or perhaps the real question is what is it about some Americans that makes them so angry about trains?)?

I just don't understand.


  1. You've come upon the same conclusion that I have, and as you may have noticed I've been tooting variations of that horn on The Economist for literally years now.

    In April last year, I wrote this:

    The tl;dr version of this is that unfunded Federal direct highway subsidies in 2007 were effectively 96 billion dollars. Clearly that was quite an operating loss for the Federal government, and as we've seen with the recent Virginia gas tax, states are running an operating loss as well.

    Megan McArdle had a post about this some time ago:

    I don't want to bash McArdle too much since she's clearly trying to stake out a middle ground, but she still gets a lot wrong. For example, she cites numbers for federal highway subsidies that I can't find. The 2007 highway deficit, as I talked about, was much higher. She also falls into Randall O'Toole's trap of counting subsidies per person per trip rather than subsidies per person-mile traveled. After all, we're far more likely to take cars over short-distance hops than we are to take on Amtrak, which is after all intercity. Most of all, McArdle also completely overlooks state-level subsidies, which is again highly misleading.

    It frustrates me that people who have the intelligence to discuss this issue clearly pay little to obvious, glaring errors of the type McArdle managed to spew. At some point, I want to do a comparison of total road spending vs. toll fees collected and the total Federal and state gasoline tax revenue, and then compare that to estimates of total US VMT. Not quite sure how to objectively value a single VMT on a paved road, though. A possible method would be to value a single VMT based on an alternative hypothesis, such as value of driving on a paved road vis-a-vis one composed of dirt or gravel, segregated by vehicle type. Of course, we would also have to take into account the economic value of time saved from driving relatively quickly.

    Then again, I'm once again hosed by business travel, so that'll have to wait for another day.

    1. I'd like to see those numbers if you calculate them. Sounds like a lot of work, however. Valuing between pavement and dirt seems difficult because in many areas there would probably be a safety issue due to flooding and probably other problems. Well outside my area of expertise, however.

  2. I suspect the difference is that the railroads are operated by private companies. So if they are running at a loss, they must be doing something wrong. And if that loss is (even partially) made up by the government, it is a subsidy to private business.

    In contrast, the roads (outside the occasional toll road in the Eastern part of the country) are not privately operated. So nobody feels like the fact that they run at a loss is a subsidy to private business. Even though, for every business which uses them, they actually are exactly that.

    Not saying that the view that railroads are doing something "wrong" because they run at a loss is rational. But I suspect that this is where it comes from.

    1. That makes sense, unlike with the road system Amtrak can be compared to private railroad operators; as well as commuter rail systems connecting cities like Chicago or New York (not Detroit, unfortunately, I hate commuting by car) with surrounding areas.

      I wonder if the privatization of certain toll roads might begin to shift this, but since the comparison of these with other roads is so obviously flawed it very well may not. Most of these are little more than corporate giveaways anyway though I can always hope for greater scrutiny.

  3. It seems to me, though, that the case for public roads is twofold: first, there isn't really an efficient way to charge people based on how much they use them; second, even people who never drive benefit from the existence of this infrastructure for proving them with the goods they need.

    Neither of these arguments hold in the case of passenger rail. First, unlike with roads, we can simply charge the people who use them directly rather than *charging* everyone the same amount. Second, building more passenger rail does not give us much more in the way of infrastructure for moving goods around the country as we already have industrial rail for that purpose.

    So in short: the case for roads as a public good is simply stronger than the case for rail as a public good.

    Mind you, I don't care either way about whether we fund Amtrak, I just think that it is erroneous to compare Amtrak to public highways.

  4. I don't think the comparison is of AmTrak to the public highways. It is of rail (all rail, including freight) to the public highways.

    If we were to just look at AmTrak, we would have to compare it to toll roads which only allow passenger cars. Not too many of those.

  5. Gregory,

    I'd agree that the case is certainly stronger for roads and rail, but rail also provides public goods like decreased congestion and lower pollution. With pollution especially there is a major advantage over short haul air (and reducing net fuel consumption is an additional public good). I see it as a matter of degree, rather than one of kind.

    As wj says, it does matter if you expand beyond Amtrak to rail in general. Rail is generally not subsidized much at all today despite being more efficient. It would probably be more efficient to subsidize rail more than we do and roads less.

    When Amtrak specifically is under discussion things get messier for the reasons you mentioned. But there is still a public goods component that seems to often be left out of these discussion; especially since rail is competing with close to 100% subsidized roads.